SSE profits more than triple as UK energy prices soar
The electricity generator and network company SSE has reported a more than tripling of profits thanks to soaring energy prices – a day before the government is expected to expand a windfall tax on the power sector.
The company, which is based in Perth, Scotland, and runs gas-fired power stations alongside hydroelectric plants and windfarms, reported a 221% increase in adjusted pre-tax profits year on year to £559m in the six months to the end of September.
SSE has benefited from an increase in gas prices in the UK since Russia’s invasion of Ukraine.
The publication of the soaring financial performance at the firm, which in May significantly upgraded its profits forecast for this year, comes a day before the chancellor, Jeremy Hunt, is forecast to announce a 40% windfall tax on “excess returns” being made by electricity generators.
Last month, analysts estimated that profits at the world’s seven biggest energy companies had soared by £150bn so far in 2022.
SSE attempted to play down the profits increase by saying it invested a record £1.7bn on energy security and sustainable energy projects.
“Cheaper, cleaner and more secure energy is coming, it just needs to be built, and SSE is building at pace,” Alistair Phillips-Davies, the chief executive, said. “With a supportive government policy environment, SSE alone could invest more than £24bn in Great Britain by the end of this decade.”
Phillips-Davies said SSE’s investment plans would create “tens of thousands” of jobs and “deliver greater financial security to families and improved energy security for everyone”.
Asked about his view on the potential windfall tax, he said: “In terms of levies, caps, windfall taxes – if they’re fair and reasonable, fine. One of the things we’ve got to be careful of in the UK … we’ve got one of the best renewable green investment markets in the world, we’ve created the biggest offshore wind market in the world, it’s critical that we don’t endanger that.
“Particularly when all of that investment is going to be delivering energy through this decade at far, far lower costs than we’re currently importing energy.”
Research released on Wednesday by the Energy and Utilities Alliance showed the public is supportive of windfall taxes. A survey of 2,000 adults
revealed 79% support a windfall tax on the excess profits of energy producers compared with under 5% who were opposed.
SSE, which said its profits were largely fuelled by higher revenue from its gas-fired plants, said its renewable energy output was affected by inclement weather during the reporting period. The company said operating profits in its thermal division, which includes gas-fired power plants, had increased by 178% to £100.4m because of the “higher and more volatile gas and power market price environment”. Its gas storage arm recorded a 415% rise in profits to £147.8m, driven by the volatile conditions.
Its new gas-fired power station in North Lincolnshire, Keadby 2, will be operational on 19 December and is planned to be “Europe’s most-efficient gas plant”.
However, Philips-Davies said the company had written off £2.4bn on its gas storage and generation business over the last decade. “We’ve definitely seen an uptick in profitability for that but that is definitely against a number of years where we’ve seen suppressed or, in the case of gas storage, no profitability whatsoever.”
The company is in the process of selling a 25% stake in its power transmission assets to raise cash to build more renewables generation as it focuses on wind and hydropower in Scotland. SSE said it expected to reach a sale agreement “in the coming weeks”.
It is also constructing the Seagreen offshore windfarm, which will be the world’s largest, and developing a pumped hydropower plant at Coire Glas in the Highlands. The completion of the project has been delayed from April into next summer.